Consider the following analyst estimate information for KTS corporation: FCF Dividend Analysts Growth est. Analysts Growth est:
Analyst 3 =7.00%, Analyst 1= 10.00%, Analyst 2= 8.00%, Analyst 2= 12.00%, Analyst 2 =13.00%. Assume KTS has a current FCF of $3,000, a current dividend of $0.75 per share, WACC of 12%, a cost of equity of 15%, $25,000 in debt and 1,500 shares outstanding.
1) Using a constant FCF model and the analyst estimate data, what is the high, low, and weighted average estimate for the value of a share of KTS stock?
2) Using a constant dividend discount model and the analyst estimate data, what is the high, low, and weighted average estimate for the value of a share of KTS stock?
3) If the current market price of KTS stock is $30 per share would you recommend purchase?
Write up your answers to the three questions above in a one-page executive summary. You should write one paragraph for each question. Be sure to discuss the assumptions you used in your models (particularly the growth assumptions) and include the spreadsheet you used in your analysis. Your spreadsheet should be well organized and labeled accurately. Post your executive summary in a MS-Word document and answers to the case in a MS-Excel spreadsheet.